Pay-TV bills rise 6% despite fall in disposable incomes

Even though customer disposable incomes are either flat-lining or falling, pay-TV bills are still rising, according to new research by the NPD Group.
In what should be a major concern, and conversely manna to over-the-top (OTT) video providers, the data from The Digital Video Outlook report calculated that the average pay-TV subscription for basic pay-TV service and premium-TV channels in the US reached $86 per month in 2011. At the heart of this figure is a trend whereby rises in TV programme licensing fees have risen, pushing monthly pay-TV rates by 6%.

NPD warns that if the situation continues on its current trajectory, the average US pay-TV bill will reach $123 by the year 2015 and $200 by 2020.
At present, the analyst calculated, 16% of US households do not currently subscribe to pay-TV services, and it suggests that a sharp rise in housing vacancies due to the mortgage crisis alone has led to five million fewer US households viewing pay-TV services. Due to bulk-service pay-TV contracts with apartment complexes and home owners associations that have allowed pay-TV operators to retain subscriptions in vacant homes, total pay-TV subscriptions in the US have not declined much. However, with rocketing rises this situation may not last for long as stretched homes embark on cord-cutting.
"As pay-TV costs rise and consumers' spending power stays flat, the traditional affiliate-fee business model for pay-TV companies appears to be unsustainable in the long term," said Keith Nissen, research director for The NPD Group. "Much needed structural changes to the pay-TV industry will not happen quickly or easily; however, the emerging competition between subscription VOD (SVOD) and premium-TV suppliers might be the spark that ignites the necessary business-model transformation of the pay-TV industry."